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Tuesday, December 31, 2013

Joseph Stiglitz on Trust

Joseph Stiglitz has an excellent essay on the value of trust, and the lack of it in today's society.

Trust is what makes contracts, plans and everyday
transactions possible; it facilitates the democratic process, from
voting to law creation, and is necessary for social stability. It is
essential for our lives. It is trust, more than money, that makes the
world go round.

At the end, he discusses a bit about the security mechanisms necessary to restore it:

I suspect there is only one way to really get trust back. We
need to pass strong regulations, embodying norms of good behavior, and
appoint bold regulators to enforce them. We did just that after the
roaring ’20s crashed; our efforts since 2007 have been sputtering and
incomplete. Firms also need to do better than skirt the edges of
regulations. We need higher norms for what constitutes acceptable
behavior, like those embodied in the United Nations’ Guiding Principles on Business and Human Rights.
But we also need regulations to enforce these norms ­ a new version of
trust but verify. No rules will be strong enough to prevent every abuse,
yet good, strong regulations can stop the worst of it.